Echelons refer to the distinct levels or stages in a supply chain through which products flow, such as suppliers, manufacturers, distribution centers, wholesalers, and retailers. Each echelon maintains its own inventory and decision-making processes, often creating challenges in coordination and visibility. In inventory optimization, a multi-echelon supply chain considers interdependencies between these layers. Managing inventory across echelons—known as Multi-Echelon Inventory Optimization (MEIO)—helps reduce overall system inventory while maintaining service levels. For example, increasing buffer stock at a central distribution center may allow for leaner inventory at regional locations. Understanding and optimizing echelons requires visibility across the entire supply network and accurate modeling of demand variability, lead times, and replenishment policies. Technologies such as digital twins, supply chain control towers, and AI-based planning platforms are making it easier to synchronize inventory decisions across multiple echelons.
